Basic Principles of Investing

1. Endeavor to save 20% (minimum 10%) of your paycheque for the future. For budgeting purposes, this means you have 80 cents to spend for every $1 of net income. Doing this throughout your life will give you a good head start to having enough money for retirement.

2. Create an emergency fund. This fund, as the name suggests, is for major emergencies (ie. job loss, major illness). You should have sufficient money to cover 6 months worth of expenses in this fund. This money should be ‘liquid’, ie. easily accessible when needed. A TFSA is ideal for this purpose.

3. Most important of all: set your goals and priorities, make a plan of action, and write it down. Decide what you want to do with your money so that you are in control of it, rather than it controlling you. Without a formal plan people will tend to delay and drift; with a plan you know your goals and are more likely to achieve them.

Short Term Goals: 1 to 3 years. Could be saving for birthday/Christmas gifts, a vacation, a computer etc.

Medium Term Goals: 4 to 10 years. Examples include saving for a down payment on a house or condominium.

Long Term Goals: Longer than 10 years. Typically would be debt reduction (ie. Mortgage) and saving for retirement.